EU reaches political deal on seven-year budget

A political deal on the EU's hotly contested seven-year budget has been struck, European Commission President Jose Manuel Barroso has announced.

The deal on the 2014-2020 budget was reached between member states and European Parliament leaders, he said.

The 960bn-euro (£822bn; $1.3tn) budget cuts real spending for the first time.

Speaking in Brussels as EU leaders gathered for a summit, Mr Barroso said the deal would speed up spending on youth employment.

Nearly a quarter of people aged 18 to 25 in the EU have no job, while in Greece and Spain it is more than half.

Analysis

By Chris MorrisBBC News, Brussels

The deal agreed by EU leaders in February did not have enough support to be passed in the European Parliament. So something had to give, because under the 2009 Lisbon Treaty, the parliament now has the power to block the multi-annual budget if it wants.

There are still MEPs who are disappointed but the new deal looks set to be approved. The socialist group leader, Hannes Swoboda, said the compromise was "not ideal, but there are decisive improvements".

The overall ceiling on spending will not change - and that means leaders like UK Prime Minister David Cameron can continue to say that they have secured a real-terms cut in the budget for the first time. But the structure of the budget deal has become more flexible, to reflect the fact that many MEPs want to ensure that as much of the money as possible is actually spent.

In the current seven-year budget, tens of billions of euros have not been spent, and funds have been returned to national coffers. If that does not happen over the next seven years - and money is transferred from one area to another, or from one year to another, as MEPs insist it should be - then it is possible in theory that spending could rise.

Amid widespread resistance to the ongoing austerity measures in the eurozone, trade unions in Portugal began a 24-hour strike on Thursday.

Public transport crawled to a halt as a result of the action by unions representing more than a million workers.

The 2014-2020 budget was agreed at a summit in February but its ratification had been blocked by the parliament.

It appears that under the new deal, the figures agreed will remain unchanged but, in a concession to the European Parliament, unspent money will be transferred from one year to the next, rather than returning to national budgets as at present.

The speaker of the European Parliament, Martin Schulz, urged MEPs to give it their backing.

He told reporters the deal was "the minimum" that MEPs had pushed for, but "from a psychological point of view it's progress".

If the 27 governments give unanimous approval, and a majority of MEPs back the deal, the final text will be adopted in September.

Jobs drive

European Council head Herman Van Rompuy said in a press release that youth employment schemes should be accelerated and youth mobility increased.

Unemployment rates

Greece - 27%

Spain - 26.8%

Portugal - 17.8%

Cyprus - 15.6%

Rep of Ireland - 13.5%

Italy - 12%

France - 11%

EU average - 11%

UK - 7.7%

Germany - 5.4%

Source: Eurostat, April 2013 (Figures for Greece & UK are for February 2013)

The Commission's Youth Guarantee plan would offer young people across Europe a quality apprenticeship or job in the first four months after becoming unemployed or leaving formal education.

An unemployed Czech graduate, Dagmar Hvizdosova, told the BBC "it's been one year since I got my bachelor degree in media studies - I´ve been trying to find a job in that industry, however, I haven't been successful. I've therefore decided to move abroad and go for a Master's degree...

"Here in the Czech Republic there are so many people with university degrees that it is impossible to find a job straight after school. In addition, the bachelor degree is underrated - it now has the same or possibly less value as secondary education about 10 years ago."

A source at the European Commission said an extra 10bn euros in funding for the European Investment Bank (EIB) could be used to encourage private banks to lend more to small and medium-sized businesses (SMEs), which account for about 99% of businesses in the EU.

The draft summit conclusions, seen by the BBC, say the leaders note "the importance of shifting taxation away from labour, as a means of increasing employability and boosting job creation and competitiveness".

In a statement on arrival, UK Prime Minister David Cameron said "what this [EU] council should be about is doing in Brussels what we're doing in Britain, which is getting control of spending, making sure we live within our means and then making ourselves more competitive, getting rid of regulations, making it easier for businesses to create jobs".

Under the bank rescue deal, bank creditors and shareholders of failed banks would take the first hits, followed by savers with deposits of more than 100,000 euros.

If that is not enough, government help would be called upon, and taxpayers would be among the last to shoulder losses.

Leaders are also expected to approve accession talks for Serbia, as well as formalising Croatia's entry into the EU next week.

Serbian Prime Minister Ivica Dacic said on the eve of the summit that he hoped to see his country join within five years at most.